Still, I remember my first job when I heard the first time these salary terms CTC (Cost To Company), Gross Salary, Take Home Salary, In-Hand Salary, and Salary Package.
It was hard for me to understand what is CTC in salary and other salary components.
And I know it’s happened with most of us and take time to understand these terms.
It’s very important to understand your Monthly CTC or Yearly CTC which is also called Salary Package to negotiate your salary.
Being an HR person I can understand the salary terms CTC, Gross Salary, Salary Package, and in-hand Salary. But for freshers, it’s very difficult to understand these salary terms as they are not taught about it as well as I can say many experienced employees are also confused in Gross Salary and CTC (Cost to Company).
So in this article, I am going to explain What is CTC in salary with example.
What is CTC in Salary?
CTC or Cost To Company is the same thing. The total cost a company bear on an employee as remuneration a year is called CTC. CTC may also refer to a yearly salary package.
In CTC company add all the other benefits such as insurance premium, performance bonus, gratuity, incentives, etc. along with per month salary.
CTC contains all the monetary components as well as other amounts spent on an employee by company or employer.
Salary Structure and components
Fixed Salary Components
- Dearness Allowance (DA),
- House Rent Allowance (HRA),
- Conveyance Allowance,
- Special allowance,
- Medical Allowance,
- Education Allowance,
Above mentioned components are part of the Fixed salary component and they may include more or vary from company to company.
Variable Salary Components
Performance-based Incentives may be based on Performance sales or profit. These are the part of the Variable Salary Component.
Reimbursable Components in Salary
Reimbursements or Reimbursable includes conveyance, medical, telephone, etc. in your salary component.
Statutory Components in Salary
Statutory benefits offered by the company or contributions paid like Provident Fund, ESI, Bonus, Gratuity, etc. come under employer contributions in your salary components.
What is Gross Salary?
As you know now CTC is the Total Cost an employer bear on an employee every month or year.
If we deduct statutory components, reimbursable components, and variable components (some organization keeps into the fixed component) from CTC then it becomes Gross Salary.
In simple words, gross salary is the total of fixed salary components, in some organizations, it may vary if they include variable components or reimbursable components on monthly basis.
What is In-hand Salary or Take Home Salary?
In simple words, in-hand salary is the salary you get after all deductions.
In other words deduct the Statutory contribution of employee parts and other deductions like advances, damages, etc. from the gross salary it becomes in-hand salary or take-home salary.
Now what all are the deduction :
- PF Contribution of an Employee
- ESI Contribution of an Employee
- TDS (as per income tax slab)
- Other applicable taxes
- Advance amount
- and other subsidized services cost.
Difference Between CTC, Gross Salary and Net Salary
|CTC (Cost To Company)||Gross Salary||Net Salary /In-Hand Salary|
|Total cost company expense on an employee||Total fixed component after variables and employer statutory liability||The salary an employee get in bank or cash|
|CTC = Gross Salary + Variables + Reimbursements + employer statutory liability||Gross Salary = in-hand + employee statutory contribution||Net Salary = Gross Salary – employee statutory contribution – tax – advance|
How to Calculate CTC In Salary With Example?
Till now you know all about salary terms i.e. CTC (Cost To Company), Gross Salary, In-Hand Salary or Take Home Salary.
Now you will be able to calculate and understand what is the CTC in Salary.
Watch this video to understand the calculation part of your salary whether it is gross, in-hand, or CTC.